Senate BillNo. 211


Introduced by Senator Price

February 11, 2013


An act to amend Sections 19551.1 and 19551.5 of, and to amend and repeal Section 19551 of, the Revenue and Taxation Code, relating to taxation.

LEGISLATIVE COUNSEL’S DIGEST

SB 211, as introduced, Price. Tax administration: disclosure of information: Franchise Tax Board and cities.

Existing law authorizes, until December 31, 2013, a city that has entered into a reciprocal agreement, as defined, with the Franchise Tax Board, to exchange tax information, as provided. Existing law limits the use of the tax data received from the Franchise Tax Board for business tax administration purposes and provides that any other use or disclosure of the information is punishable as a misdemeanor.

This bill would delete the repeal date of the provisions relating to the reciprocal agreements between the Franchise Tax Board and cities, thus indefinitely extending the duration for these provisions.

Because this bill would continue the operation of the reciprocal agreement tax information agreement, and the unauthorized use of such information would be a crime, it would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

P2    1

SECTION 1.  

Section 19551 of the Revenue and Taxation Code,
2as amended by Section 1 of Chapter 345 of the Statutes of 2008,
3is amended to read:

4

19551.  

(a) The Franchise Tax Board may permit the
5Commissioner of Internal Revenue of the United States, other tax
6officials of this state, the Multistate Tax Commission, the proper
7officer of any state imposing an income tax or a tax measured by
8income or the authorized representative of that officer, or the tax
9officials of Mexico, if a reciprocal agreement exists, to inspect the
10income tax returns of any taxpayer, or may furnish to the
11commission, or the officer or the authorized representative thereof
12an abstract of the return or supply thereto information concerning
13any item of income contained in any return or disclosed by the
14report of any investigation of the income or return. The information
15shall be furnished to the Multistate Tax Commission, the federal
16or state officer or his or her representative, or the officials of
17Mexico for tax purposes only. Except when furnished pursuant to
18a written agreement, information furnished pursuant to this section
19shall be furnished only if the request is in the form of an affidavit
20under penalty of perjury stating that the purpose for the request
21relates to an investigation of the tax specified in the request and
22that the information will be used in the ordinary performance of
23the applicant’s official duties.

24(b) Notwithstanding subdivision (a) and except as otherwise
25provided in Section 19551.1, tax officials of political subdivisions
26of this state shall request information from the Franchise Tax Board
27by affidavit only. At the time a tax official makes the request, he
28or she shall provide the affected person with a copy of the affidavit
29and, upon request, make the information obtained available to that
30person.

31(c) For purposes of this section, “reciprocal agreement” means
32a formal agreement to exchange information between national
33taxing officials of Mexico and taxing authorities of the State Board
34of Equalization, the Franchise Tax Board, and the Employment
35Development Department. Furthermore, the reciprocal agreement
36shall be limited to the exchange of information that is essential for
37tax administration purposes only. Taxing authorities of the State
38of California shall be granted tax information only on California
P3    1residents. Taxing authorities of Mexico shall be granted tax
2information only on Mexican nationals.

begin delete

3(d) This section shall remain in effect through and including
4December 31, 2013, and shall be repealed on January 1, 2014.

end delete
5

SEC. 2.  

Section 19551 of the Revenue and Taxation Code, as
6added by Section 2 of Chapter 345 of the Statutes of 2008, is
7repealed.

begin delete
8

19551.  

(a) The Franchise Tax Board may permit the
9Commissioner of Internal Revenue of the United States, other tax
10officials of this state, the Multistate Tax Commission, the proper
11officer of any state imposing an income tax or a tax measured by
12income or the authorized representative of that officer, or the tax
13officials of Mexico, if a reciprocal agreement exists, to inspect the
14income tax returns of any taxpayer, or may furnish to the
15commission, or the officer or the authorized representative thereof
16an abstract of the return or supply thereto information concerning
17any item of income contained in any return or disclosed by the
18report of any investigation of the income or return. The information
19shall be furnished to the Multistate Tax Commission, the federal
20or state officer or his or her representative, or the officials of
21Mexico for tax purposes only. Except when furnished pursuant to
22a written agreement, information furnished pursuant to this section
23shall be furnished only if the request is in the form of an affidavit
24under penalty of perjury stating that the purpose for the request
25relates to an investigation of the tax specified in the request and
26that the information will be used in the ordinary performance of
27the applicant’s official duties.

28(b) Notwithstanding subdivision (a), tax officials of political
29subdivisions of this state shall request information from the
30Franchise Tax Board by affidavit only. At the time a tax official
31makes the request, he or she shall provide the affected person with
32a copy of the affidavit and, upon request, make the information
33obtained available to that person.

34(c) For purposes of this section, “reciprocal agreement” means
35a formal agreement to exchange information between national
36taxing officials of Mexico and taxing authorities of the State Board
37of Equalization, the Franchise Tax Board, and the Employment
38Development Department. Furthermore, the reciprocal agreement
39shall be limited to the exchange of information that is essential for
40tax administration purposes only. Taxing authorities of the State
P4    1of California shall be granted tax information only on California
2residents. Taxing authorities of Mexico shall be granted tax
3information only on Mexican nationals.

4(d) This section shall become operative on January 1, 2014.

end delete
5

SEC. 3.  

Section 19551.1 of the Revenue and Taxation Code
6 is amended to read:

7

19551.1.  

(a) (1) The Franchise Tax Board may permit the tax
8officials of any city to enter into a reciprocal agreement with the
9Franchise Tax Board to obtain tax information from the Franchise
10Tax Board, as specified in subdivision (b).

11(2) For purposes of this section, “reciprocal agreement” means
12a formal agreement to exchange information for tax administration
13purposes between tax officials of a city and the Franchise Tax
14Board.

15(b) The information furnished to tax officials of a city under
16this section shall be limited as follows:

17(1) The tax officials of a city are authorized to receive
18information only with respect to taxpayers with an address as
19reflected on the Franchise Tax Board’s records within the
20jurisdictional boundaries of the city who report income from a
21trade or business to the Franchise Tax Board.

22(2) The tax information that may be provided by the Franchise
23Tax Board to a city is limited to a taxpayer’s name, address, social
24security or taxpayer identification number, and business activity
25code.

26(3) Tax information provided to the taxing authority of a city
27may not be furnished to, or used by, any person other than an
28employeebegin insert or agentend insert of that taxing authority.

29(4) The information provided to the tax officials of the city by
30the Franchise Tax Board under this section is subject to Section
3119542, and may not be used for any purpose other than the city’s
32tax enforcement, or as otherwise authorized by state or federal
33law.

34(5) Section 19542.1 applies to this section.

35(c) The Franchise Tax Board may not provide any information
36pursuant to this section until all of the following have occurred:

37(1) An agreement has been executed between a city and the
38Franchise Tax Board, that provides that an amount equal to all
39first year costs necessary to furnish the city information pursuant
40to this section shall be received by the Franchise Tax Board before
P5    1the Franchise Tax Board incurs any costs associated with the
2activity permitted by this section. For purposes of this section, first
3year costs include costs associated with, but not limited to, the
4purchasing of equipment, the development of processes, and labor.

5(2) An agreement has been executed between a city and the
6Franchise Tax Board, that provides that the annual costs incurred
7by the Franchise Tax Board, as a result of the activity permitted
8by this section, shall be reimbursed by the city to the Franchise
9Tax Board.

10(3) Pursuant to the agreement described in paragraph (1), the
11Franchise Tax Board has received an amount equal to the first year
12costs.

13(d) Any information, other than the type of tax information
14specified in subdivision (b), may be requested by the tax officials
15of a city from the Franchise Tax Board by affidavit. At the time a
16tax official makes the request, he or she shall provide the person
17whose information is the subject of the request, with a copy of the
18affidavit and, upon request, make the information obtained
19available to that person.

20(e) This section does not invalidate any other law. This section
21does not preclude any city or county from obtaining information
22about individual taxpayers, including those taxpayers not subject
23to this section, by any other means permitted by state or federal
24law.

25(f) Nothing in this section shall be construed to affect any
26obligations, rights, or remedies regarding personal information
27provided under state or federal law.

28(g) Notwithstanding subdivision (c), the Franchise Tax Board
29shall waive a city’s reimbursement of the Franchise Tax Board’s
30cost if a city enters into a reciprocal agreement as defined in
31paragraph (2) of subdivision (a). The reciprocal agreement shall
32specify that each party shall bear its own costs to furnish the data
33involved in the exchange authorized by this section and Section
34 19551.5, and a city shall be precluded from obtaining
35reimbursement as specified under Section 5 of the act adding this
36subdivision.

begin delete

37(h) This section shall remain in effect through and including
38December 31, 2013, and shall be repealed on January 1, 2014.

end delete
39

SEC. 4.  

Section 19551.5 of the Revenue and Taxation Code
40 is amended to read:

P6    1

19551.5.  

(a) Notwithstanding any other law, each city that
2assesses a city business tax or requires a city business license shall,
3upon the request of the Franchise Tax Board, annually submit to
4the Franchise Tax Board the information that is collected in the
5course of administration of the city’s business tax program, as
6described in subdivision (b).

7(b) Information, collected in the course of administration of the
8city’s business tax program, shall be limited to the following:

9(1) Name of the business, if the business is a corporation,
10partnership, or limited liability company, or the owner’s name if
11the business is a sole proprietorship.

12(2) Business mailing address.

13(3) Federal employer identification number, if applicable, or
14the business owner’s social security number.

15(4) Standard Industrial Classification (SIC) Code or North
16American Industry Classification System (NAICS) Code.

17(5) Business start date.

18(6) Business cease date.

19(7) City number.

20(8) Ownership type.

21(c) The reports required under this section shall be filed on
22magnetic media such as tapes or compact discs, through a secure
23electronic process, or in other machine-readable form, according
24to standards prescribed by regulations promulgated by the
25Franchise Tax Board.

26(d) Cities that receive a request from the Franchise Tax Board
27shall begin providing to the Franchise Tax Board the information
28required by this section as soon as economically feasible, but no
29later than December 31, 2009. The information shall be furnished
30annually at a time and in the form that the Franchise Tax Board
31may prescribe by regulation.

32(e) The city data provided to the Franchise Tax Board under
33this section is subject to Section 19542, and may not be used for
34any purpose other than state tax enforcement or as otherwise
35authorized by law.

36(f) If a city enters into a reciprocal agreement with the Franchise
37Tax Board pursuant to subdivision (a) of Section 19551.1, the city
38shall also waive reimbursement for costs incurred to provide
39information required under this section and shall be precluded
40from obtaining reimbursement as specified under Section 5 of
P7    1Chapter 345 of the Statutes of 2008. The reciprocal agreement
2shall specify that each party shall bear its own costs to furnish the
3data involved in the exchange authorized by Section 19551.1 and
4this section, and the Franchise Tax Board shall be precluded from
5obtaining reimbursement as specified under subdivision (c) of
6Section 19551.1.

7(g) A city shall not be required to provide information to the
8Franchise Tax Board pursuant to this section if the Franchise Tax
9Board fails to provide tax information to the city pursuant to a
10reciprocal agreement entered into pursuant to subdivision (a) of
11Section 19551.1 for reasons other than concerns related to
12confidentiality of tax information provided to the city.

begin delete

13(h) This section shall remain in effect through and including
14December 31, 2013, and shall be repealed on January 1, 2014.

end delete
15

SEC. 5.  

No reimbursement is required by this act pursuant to
16Section 6 of Article XIII B of the California Constitution because
17the only costs that may be incurred by a local agency or school
18district will be incurred because this act creates a new crime or
19infraction, eliminates a crime or infraction, or changes the penalty
20for a crime or infraction, within the meaning of Section 17556 of
21the Government Code, or changes the definition of a crime within
22the meaning of Section 6 of Article XIII B of the California
23Constitution.



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